House Rejects Senate Bill To Extend Payroll-Tax Cut

CNBC.com with AP

Tuesday, 20 Dec 2011 | 1:23 PM ETCNBC.com

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US Capitol Building

The GOP-led House rejected a Senate bill to extend the payroll-tax cut for two months, putting the two chambers on yet-another collision course with millions of Americans facing tax increases and cuts in jobless benefits if the dispute is not resolved by year-end.

The House vote Tuesday had been expected, with Republicans calling for a full-year extension of the payroll-tax cut.

Unless Congress acts, 160 million workers on Jan. 1 will see a 2-percentage-point increase in the Social Security payroll tax that is deducted from their paychecks, and benefits for millions of long-term unemployed people will start to expire.

On Monday, Senate Majority Leader Harry Reid said he wouldn't renegotiate an extension of payroll tax cuts and unemployment coverage unless the House first approved the short-term version the Senate overwhelmingly approved.

"This is a question of whether the House of Representatives will be able to fulfill the basic legislative function of passing an overwhelmingly bipartisan agreement in order to protect the economic security of millions of middle-class Americans," Reid said in a written statement.

The Senate passed a two-month extension of the payroll tax cut and unemployment benefits on Saturday with overwhelming support from senators of both parties and the backing of Obama. It had been negotiated by Senate Democratic and GOP leaders after they could not agree on how to pay for a more expensive, year-long measure.

After that vote, House Republicans told their leaders that they strongly opposed the Senate bill, complaining it lacked serious spending cuts and was too short. Boehner and other top House Republicans then said they opposed the Senate-approved bill.

Monday morning, Boehner told reporters that the House would reject the Senate-passed bill but said he didn't think it would be hard for the two sides to bridge their differences.

"It's time to stop the nonsense. We can resolve these differences and we can do it in a way that provides certainty for job creators and others," Boehner said at a news conference, although he provided no estimate on how long it might take to produce a compromise.

House Majority Leader Eric Cantor, R-Va., said lawmakers would not let the tax increase kick in, but he did not say how they would resolve the dispute.

"We are going to stay here and do our work until we guarantee that no one faces a tax increase in the year ahead," Cantor said in a statement.

The leaders' comments came after a chaotic weekend in which Senate leaders first failed to agree on a full-year bill, then coalesced around the two-month-extension that passed overwhelmingly, only to spark a revolt among GOP conservatives in the House.

The revolt of the rank and file placed Boehner and Republicans in a difficult position, just as it appeared they had outmaneuvered Obama by assuring that the legislation would require him to make a swift decision on construction of a proposed oil pipeline.

Obama had announced he would put off the issue until after thepresidential election in 2012rather than decide the fate of a project that divided usual Democratic allies — environmentalists opposing and several labor unions supporting.

In a television interview shortly before Boehner's news conference, White House communications director Dan Pfeiffer accused Boehner of reversing his position on the two-month measure because of a "tea party revolt."

In his statement, Reid said he and Senate Minority Leader Mitch McConnell, R-Ky., had negotiated their compromise "at Speaker Boehner's request."

Boehner, R-Ohio, said he had not changed his view on the Senate bill.

"I raised concerns about the two-month process from the moment I heard about it," he said. He called on members of the Senate to "put their vacations on hold" and return to forge a compromise.

Obama has said repeatedly that Congress should not quit for the year until the tax cut has been extended, and has said he would postpone a planned Hawaiian vacation until the bill is finished.

In an unusually harsh critique of his own party, moderate GOP Sen. Scott Brown of Massachusetts said House Republicans' opposition to the two-month extension was "irresponsible and wrong" because it threatened to result in tax increases and jobless benefit cuts.

"We cannot allow rigid partisan ideology and unwillingness to compromise stand in the way of working together," Brown said in a written statement.

The brinksmanship is a familiar pattern this year between the two parties, who have narrowly averted a federal default and several government shutdowns in past fights.